Join us to learn about Shared Platforms and how they enable grassroots initiatives to focus on their work and community-building ideas.

• The government has not committed to implement significant new initiatives within a firm timeframe, whether a home in government for the sector, changes in direction and control that make shared platforms easier, equal access to business development supports provided to for-profit companies, or a human resources strategy for the sector.
• In policy areas where government has agreed to review an issue, there is no sense of urgency, nor is there a commitment to find sector-government solutions. For instance, the Canada Revenue Agency (CRA) was asked to revise its interpretation of the “not-for-profit purpose rule” so there is clarity about nonprofits’ ability to generate and reinvest surplus funds. This is not a new problem. CRA undertook a three-year research project in 2010- 2013 and unearthed the issue. This pace of response to legitimate sector concerns would not be tolerated in any other sector.
• The government has referred many significant and substantial issues to the which has already begun to release reports that substantiate the Senate committee recommendations. Let’s hope the response to these reports is more prompt and action-filled than the federal government’s response to Catalyst for Change
  As Canada emerges from the pandemic, the essential supports in our communities provided by the nonprofit sector will be critical. Government must re-commit to partnering with the nonprofit sector to rebuild communities and people’s lives, and create systems change by tackling economic inequity and empowering Black and Indigenous communities, and addressing the climate crisis. We urge the federal government to take the nonprofit sector’s issues seriously and to accelerate the changes we need. Let’s hope the more encouraging federal budget, rather than the tepid response to the Senate report, sets the tone for a reset for the relationship.

91ĘÓƵ’s 2019 budget may affect many nonprofit and charitable organizations across the province. Organizations expecting changes in their provincial funding arrangements need to know their specific rights and responsibilities. 

Nonprofit boards of directors and leadership need to take a clear-headed and informed approach to resolve fiscal challenges. Proper planning and preparation can ease the transition for clients, community, and staff if you need to restructure. This blog post offers some points to consider for organizations facing reduced or eliminated funding, drawing on a more in-depth bulletin we have written, which we would encourage readers to read.

Know your funding agreement
If you have been told by your provincial government ministry that your funding is being reduced or eliminated, or if you need to return funding to the government, read your agreement carefully to understand your organization’s rights and obligations. For instance, there may be contractual notice requirements that layout the timing and process by which funding is reduced or eliminated – and you should make sure that the government has provided proper notice.

Consider your options

In the face of funding cuts, the board and leadership need to take a close look at their options. This means asking some hard questions, but also looking for new opportunities. It’s worth reviewing some important questions to help determine a course of action:

Can the organization continue to function, and if so, for how long? If the organization is capable of continuing, can certain programs be eliminated or reduced in scope?

If programs need to be eliminated in order for the organization to remain financially sustainable, how will the organization notify the beneficiaries or participants of the programs and manage the program wind-down process?

Are there other funding sources potentially available either in the short- or long-term?

Can the organization remain financially viable by reducing its costs, including terminating some of its employees or selling certain assets?

Can any of the organization’s programs be transferred to another charity or not-for-profit with the resources to maintain those programs?

If it is determined that the organization is not able to continue on its own, are there opportunities to join with other organizations, e.g., by amalgamation or other types of mergers?

Clearly, there is a lot to consider. As part of its fiduciary duties, the board needs to consider the strategic alternatives that may be available to the organization. The board should have available updated and current documentation with respect to the organization’s financial situation, its material contracts (including contracts with employees and suppliers) and its insurance policies, including Commercial General Liability Insurance, and Directors and Officers Liability Insurance, as well as any outstanding or potential claims. Prior to any final decisions being made, the board will need to consider obtaining professional advice from the organization’s legal and financial advisors.

Termination costs

If an organization decides that some or all of its employees need to be terminated, the board will need to carefully consider the potential costs. Losing provincial funding doesn’t absolve an organization from their legal obligations regarding giving notice or providing lieu pay. Having termination language in an employment contract may provide some limits, but each case should be carefully reviewed. 

Executive management also needs to inform directors that employees are continuing to get paid on schedule, and that tax and other deductions are being applied as legally required. 

If worse comes to worst, and an organization can’t pay staff or creditors, insolvency may be the only option. In this scenario, a board should seek professional advice as soon as possible in order to reduce the risk of potential personal liability and liability for the organization.

Closing up shop

If a board does choose to dissolve an organization as the best or only option, it needs to consider a number of issues:

Time: Winding up operations doesn’t necessarily mean the organization has to be dissolved immediately. The board may want to look at continued corporate indemnification of directors and officers, as well as insurance considerations that should be carefully reviewed with legal counsel.

Governing documents: If an organization is a corporation, the board should review its governing documents for a dissolution clause. This would normally lay out the default obligations of the organization with respect to the distribution of any remaining property upon dissolution.

Compliance: If the organization is incorporated, it will need to ensure that its dissolution process complies with applicable corporate legislation, e.g. the 91ĘÓƵ Corporations Act (“OCA”), Canada Not-for-profit Corporations Act (“CNCA”), as well as any common law requirements. 

Charitable status: If the organization is a registered charity, it will need to request a voluntary revocation of its charitable registration with the Canada Revenue Agency, and transfer any of its remaining assets to an arm’s length charity (referred to as an “eligible donee”) or otherwise become subject to a 100% revocation tax under the Income Tax Act. 

Property: 91ĘÓƵ legislation that relates to forfeited property may apply where a charity or not-for-profit dissolves without properly disposing of its property as provided for under the Forfeited Corporate Property Act, 2015 and Escheats Act, 2015. Property of a registered charity that is an 91ĘÓƵ corporation that is not distributed is forfeited to the Crown.

Insurance considerations

Directors considering an organization’s insolvency should review the organization’s directors and officers liability insurance policies to ensure a broad scope of coverage, and that the directors and officers have coverage for liabilities that they are statutorily liable to pay on a personal basis due to the insolvency of the organization. In the event of a voluntary windup and dissolution, there remains a legal risk of claims coming forward. Therefore, as part of the windup process the organization should seek to obtain “tail coverage” under its liability insurance policies.

Get informed before taking action

There are no easy answers when dealing with funding cuts. However, directors need to equip themselves with the information necessary to make informed and important decisions. In doing so, they should obtain advice from their legal counsel and other professional advisers as necessary before making any key decisions.

For a more detailed and comprehensive discussion of important issues nonprofits may face following budget cuts, read Carters’ Bulletin, “Implications of 91ĘÓƵ’s Budget Cuts for 91ĘÓƵ Not-for-profits.”

Terrance S Carter, BA, LLB, TEP, Trade-Mark Agent, is the managing partner of Carters, and counsel to Fasken on charitable matters. Ryan M Prendergast, BA, LLB, is a partner practicing in the area of charity and not-for-profit law at Carters. Barry W. Kwasniewski, BBA, LLB, a partner, practices employment and risk management law with Carters’ Ottawa office. is a leading firm in Canada in the area of charity and not-for-profit law.

More ONN resources

ONN 2019 Budget Analysis and Funding Estimates /our-work/our-regulatory-environment/provincial-budget-2019/

Building effective collaboration while reducing administration through shared platforms /our-work/our-regulatory-environment/shared-platforms/

ONN’s vision for government funding reform /our-work/our-financing/government-investment-funding-reform/

ONN’s recommendations for modernizing 91ĘÓƵ’s transfer payment administration /our-work/our-financing/government-investment-funding-reform/transfer-payment-administration-modernization/

ONN works within three broad policy areas: our sector’s people (the paid and volunteer work force), our finances, and our regulatory environment.

Our goal is to create a more enabling environment for a strong and resilient sector so that nonprofits can focus on supporting 91ĘÓƵ’s vibrant communities.

We have four cross-cutting priorities for 2020-2021 that we will work to integrate across our advocacy and network engagement activities:

• Promoting the value and influence of the sector and the nonprofit business model.
• Continuing to explore the role of the nonprofit sector in responding to the
• Expanding our use of an intersectional gender lens (GBA+) from the Decent Work file to our policy files
• Exploring and sharing the nonprofit sector’s responses to the climate emergency, at the organizational level (e.g., our own investments and purchasing), the subsector or regional level (e.g., local disaster response and recovery, settling climate refugees) and as a sector (e.g., policy advocacy, developing a sustainable and climate-focused lens)

Our People

Our goal is to strengthen and support the nonprofit sector labour force and its diverse and active volunteer base. This will result in the mobilization of a decent work movement in the sector.
Policy priorities:

• Decent work and pensions
• Police record checks
• The future of work in the nonprofit sector

Our Financing

Our goal is to catalyze improvements in the 91ĘÓƵ nonprofit sector’s funding environment by advocating for the reform of the sector’s investment relationship with the government and for the removal of barriers for nonprofits to earn income.

Policy priorities:

• Community wealth building
• Social value procurement
• Burden reduction in funding agreements
• Public lands and civic spaces

Our Regulatory Environment

Our goal is to ensure that the 91ĘÓƵ nonprofit sector’s legal frameworks – policy, legislation, and regulation – support and empower the sector’s work.

Policy priorities:

• Public benefit lens
• Web portal for nonprofits
• 91ĘÓƵ Not-For-Profit Corporations Act
• Shared platforms

“Investing in our communities is not just about creating good jobs and economic growth. It is also about building communities that we are proud to call home.”
–

Across Canada, in every community, public benefit nonprofit organizations are hard at work reducing poverty, providing affordable housing, developing opportunities for young people, delivering quality childcare, and greening our communities. These charities, nonprofit organizations and coops have a long tradition of working together and with governments, community leaders and volunteers to make communities more resilient and more inclusive. But to be able to continue to build the communities that the government – and everyone – wants to see, there needs to be an easier way for organizations to work together.

That way is to use a “shared platforms” model of working together. And to make them truly effective the federal government needs to update charitable regulations.
In a shared platform a more established organization “adopts” a new project, leveraging its existing governance and administrative infrastructure and freeing up the project leaders to concentrate on developing the initiative. The shared platform model offers an alternative for groups undertaking charitable activities that is more accessible, and is more time- and cost-effective than incorporating and registering as a new charity.

This single innovation in governance does five great things. Shared platforms:

• Maximize community efforts and donor impact and lower risk for funders. Funders and donors are reassured that the new and experimental project they want to fund will have sound management practices and regulatory compliance if they are part of a shared platform. Moreover, the new project can concentrate on developing the program. Everyone wins.
• Maximize time and money by building on existing sector expertise. Many emerging leaders and innovative projects struggle because of the time, money, and expertise required to navigate funding and charitable regulation while trying to develop a new initiative.
• Support innovation and experimentation for public benefit. Beginning as a shared platform means new programs can be field tested and later if the program is successful people can decide to establish it as a charity. The capacity for innovation and experimentation is greatly enhanced through lower opportunity cost.
• Reduce the pressure on regulators and save them time. Registering charities and ensuring charities are compliant with regulation is very time consuming especially considering they are often very small (almost half of charities have annual budgets under $30,000). Shared platforms are a great alternative to charitable registration and many programs may not ever need their own charitable registration.
• Increase opportunities for equity and inclusion. Applying for grants and understanding all the complexities of charitable regulation is often incomprehensible to leaders from marginalized communities. Shared platforms have been very successful in allowing youth and local community innovators learn how to understand and work in the nonprofit sector.

To create the enabling policy and regulatory environment that supports the growth and development of shared platforms in local communities, the sector, their funders, provincial and local governments need three things from the federal government:

• A modernized legislative framework in which to operate. A framework that focuses on a charity’s purpose rather than activities would provide greater clarity for charities that provide a shared platform. Emerging and collaborative initiatives seeking to be part of a shared platform are often innovations of existing activities or extensions of them. The charity would be held accountable to ensure projects were consistent with its charitable purposes, while being permitted to innovate and extend its activities to further these purposes.
• Guidance on demonstrating direction and control that supports modern methods of undertaking work. A charity’s board and senior management should be permitted to delegate operational decisions regarding a project to a project team, while maintaining appropriate accountability and direction. Supporting collaboration, co-creating and less hierarchical approaches require new ways of keeping projects true to purpose.
• Formal recognition of shared platforms. Acknowledgement of shared platforms by Canada Revenue Agency including clear enabling guidelines would give organizations the clarity and confidence to provide shared platforms for initiatives that further their mission.

Shared platforms provide concrete benefits for the nonprofit sector, communities, funders, and governments. With the increasing complexity of social issues facing communities and the pace of change – including growing income equality, climate change, and marginalized groups – the nonprofit sector needs to be nimble, agile, and responsive. The federal government urgently needs to enable  shared platforms so that the sector can get on with important work across the country.

Shared Platforms: An Introduction